Over the next several days, we will publish Minor Reversal Patterns, as published in John Hill’s book, Technical and Mathematical Analysis of Trends in the Commodity and Stock Markets.

The reversal patterns listed are based on only several days of action.  They can be very useful when used in combination with the overall chart pattern and when used with other technical tools.  I will emphasize that these factors or formations used by themselves can result in trouble and lead to whip saw action.  Also, market action may not be exactly as shown.  There may be several more days of movement.  My intention is to introduce new concepts.

Pattern 3 : VIAV (VOLUME & SPREAD INCREASE AFTER ADVANCE)

viavTop – If a commodity (or stock) has a big advance and say, the last day has a wide spread with a high close, then the next day opens off 1¢-2¢ ($1-$2), is unable to exceed the top of previous day and gives a low close, it is a sign that bulls have exhausted themselves and move is temporarily or permanently over.  It is usually best to have a second day of downmove for further confirmation.  All the shorts have tried to cover at once, which leaves a vacuum in the market.  Low volume on next rally will add further confirmation that this is a top.

Bottom – Same as Top, only in reverse.

Pattern 4 : NARROW RANGE AFTER ADVANCE OR DECLINE

narrowrangeadvancedeclineTop – If a market is moving up and then has sharply accelerated movement followed by a narrow range day, it indicates buying power is temporarily exhausted.  There is a vacuum as nervous shorts have all covered.  Temporary end of move is almost assured if yo have action as shown after narrow range day.  This is a case of supply overcoming demand.

Bottom – Same as Top, only in reverse.

Copyright 2015, John Hill & Futures Truth Company

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